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What Is Crypto Marketcap?

By Carl Vogel

Cryptocurrency market cap is the easiest way to find out how large a cryptocurrency is and it will help you make smarter investment decisions. If you are new to the world of cryptocurrencies, you might have heard of the term ‘market cap’, which stands for market capitalization. No matter, whether you are a crypto investor or a hobbyist, it is crucial to understand the nuances of the crypto sphere and the factors influencing the future of the crypto market that can help you make informed decisions for your future.

Cryptocurrency market capitalization has notable implications for financial markets, with higher market capitalization being more stable for investment. It is very simple to calculate the market cap. All you have to do is multiply the coin’s current value by the total number in circulation.

In this article, we will discuss more about the crypto market capitalization, how it works, and its importance in the crypto market.

Crypto Market Capitalization

Crypto Marketcapitalization

The total dollar worth of all shares of a company’s stock, or all mined coins in the case of Bitcoin or another cryptocurrency, is known as the market capitalization of market cap. The market cap of a particular cryptocurrency can be determined by multiplying the total number of mined coins by the price of one coin at any particular moment.

Market capitalization can be thought of as a rough indicator of an asset’s likelihood of stability. Notably, even Bitcoin, the cryptocurrency with the largest market capitalization, experiences volatility. However, a cryptocurrency with a considerably greater market size is more likely to be a more stable investment than one with a much smaller market cap, much like a larger ship can safely navigate in severe weather,

On the other hand, digital currencies with smaller market capitalizations are more vulnerable to market fluctuations and may experience sharp increases or sharp decreases.

Importance of Crypto Market Capitalization

The cryptocurrency market capitalization is significant since it can serve as a rough indicator of a coin’s stability for prospective investors. In essence, a cryptocurrency’s market capitalization serves as a gauge of its level of popularity.

Coins with high market capitalization might be interpreted by investors or people interested in the long-term growth of cryptocurrencies as a sign of their popularity and increased potential for growth. More people cashing out their coins before the price decreases drastically is usually tolerated by these coins, which have a longer track record of growth.

This can be thought of as a stack of papers. Ripping a single paper would be rather simple. However, it gets harder to tear the more sheets you stack together. The same is true for cryptocurrency market caps; the thicker they are the more difficult it is to manipulate them.

What can we do with the market cap?

You may make better investing selections by comparing the entire worth of different cryptocurrencies using their market caps. Based on their market capitalization, cryptocurrencies are divided into three groups:

  • Large-cap cryptocurrencies
  • Mid-cap cryptocurrencies
  • Small-cap cryptocurrencies

Large-cap cryptocurrencies

Large-cap cryptocurrencies, like Ethereum and Bitcoin, as of March 2024 have respective market capitalizations of $390 billion and $1300 billion. Because of their proven growth history and frequently higher liquidity–the ability to tolerate a larger number of cash outs without experiencing a significant impact on price–investors view them as lower-risk investments.

Mid-cap cryptocurrencies

With market capitalization ranging from $1 billion to $10 billion, mid-cap cryptocurrencies are typically thought to have greater unrealized potential gain but also higher risk.

Small-cap cryptocurrencies

Cryptocurrencies with a market capitalization under $1 billion are known as small-caps, and they are particularly vulnerable to sharp fluctuations in market sentiment.

When assessing the dangers of any investment, market trends, a cryptocurrency’s stability, and your personal financial circumstances must all be taken into account. Market capitalization is a helpful indicator for comparing the overall value of cryptocurrencies.

Difference between Maximum Supply and Circulating Supply

If you are a crypto investor, you should be careful not to take market capitalization figures at face value. It is important to always keep in mind the various distinctions between regular financial markets and cryptocurrency.

In conventional financial markets, ‘free float’ indicators can distinguish between shares that are kept in ‘lock up’, possibly by executives, directors, or firm founders, and those that are open for public trading. This distinguishes between the circulating supply of shares and the entire supply. Similar to this, in the cryptocurrency space, a coin’s maximum supply and circulating supply may not always be clearly distinguished from one another.

The largest quantity of cryptocurrency coins or tokens that can ever exist is referred to as the maximum supply. A fixed quantity of coins will never exist since some crypto assets, like Bitcoin, have a maximum supply restriction. There is an endless supply of others, like Ethereum.

Conversely, the quantity of coins in open circulation (free float) at any particular moment is referred to as the circulating supply. These measurements may vary. Coins are waiting to be released in an initial coin offering (ICO), in addition to a potentially sizable number of privately issued or owned coins kept in lockup. Over time, some coins may be lost, while others might just sit in anonymous wallets doing nothing. 

Circulating supply measures are typically used to calculate market capitalization. However, it is important to know which measurements have been employed and how each may affect the result when calculating or taking market capitalization into account.

Cryptocurrencies Having Largest Market Capitalization

Below are some of the cryptocurrencies that have the largest market capitalization:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • XRP (XRP)
  • Solana (SOL)
  • Cardano (ADA)
  • Dogecoin (DOGE)

Conclusion

Cryptocurrency market capitalization is a fundamental metric that provides valuable insights into the overall value and stability of various cryptocurrencies. By understanding how market capitalization is calculated and its implications, investors can make more informed decisions regarding their investments in the crypto space. Market cap not only helps categorize cryptocurrencies into large-cap, mid-cap, and small-cap segments but also serves as a barometer for volatility and risk.

While larger market-cap crypto assets tend to offer more stability, smaller-cap coins may present opportunities for significant gains, with higher risk. Ultimately, whether you are a seasoned investor or a newcomer to the crypto world, understanding market cap is a vital step in building a robust investment strategy and participating effectively in this exciting and rapidly changing market.

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